Welcome to the new issue of Grow Your Knowledge Newsletter where you get free, ready to use, actionable, clear information regarding FIDIC Contracts and Construction Claims.

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Today at a Glance;

➤   Term of the Week

➤   One Tweet

➤   Payment Procedure for EPC/Turnkey Projects

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TERM of the WEEK

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ONE TWEET

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Payment-related problems mostly lead to claims.

 

But if you want you can;

➤   Avoid, or,

➤   Minimize

these kinds of claims.

 

In the event of payments;

You generally struggle with 1 of 4 challenges;

➤   You cannot determine the PREREQUISITES for the INSTALMENT of the PAYMENTS

➤   You cannot determine the DETAILS of the STATEMENT

➤   You cannot determine how to SUBMIT the STATEMENT

➤   You cannot determine the TIMING of the PAYMENTS

 

To overcome these challenges;

➤   You should clearly understand the payment procedures

 

1999 FIDIC Silver Book provides us a proper framework regarding the payment procedure, such as;

 

1.  Advance Payment

1.1 Prerequisites for the First Instalment of the Advance Payment

1.2 Timing of the Advance Payment

 

2.  Interim Payments

2.1 Submission of the Statement

2.2 The Details of the Statement

2.3 In the event of the Employer’s Disagreement

2.4 Timing of the Interim Payments

 

3.  Payments after the Issuance of the Taking Over Certificate

 

4.  Statement at Completion

4.1 The Details of the Statement

4.2 In the event of the Employer’s Disagreement

4.3 Timing of the Payment regarding the Statement at Completion

 

5.  Payments after the Expiry of the Defects Notification Period

 

6.  Issuance of the Performance Certificate

 

7.  Final Payment

7.1 Submission of the Draft Final Statement

7.2 In the event of the Employer’s Disagreement

7.3 Timing of Final Payment

 

Step #1:   Advance Payment

1.1 Prerequisites for the First Instalment of the Advance Payment

The Employer shall pay the first instalment after receiving;

1.   A Statement (under Sub-Clause 14.3 [Application for Interim Payments])

2.   The Performance Security in accordance with Sub-Clause 4.2 [Performance Security]

3.   A guarantee in amounts and currencies equal to the Advance Payment

 

1.2 Timing of the Advance Payment

Except as otherwise stated in Sub-Clause 2.5 [Employer’s Claims], the Employer is to pay the first instalment; 

➤   Within 42 days after the Contract came into full force and effect

or,

➤   Within 21 days after the Employer’s receiving the relevant documents in accordance with Sub-Clause 4.2 [Performance Security] and Sub-Clause 14.2 [Advance Payment]

whichever is later.

 

Step #2   Interim Payments

2.1 Submission of the Statement

1.   The Contractor submits six copies of the statement to the Employer after the end of the period of payment stated in the Contract (if not stated, after the end of each month)

2.   The Employer approves the form of the Statement

3.   The amounts are to be demonstrated in detail

4.   Progress report in accordance with Sub-Clause 4.21 [Progress Reports] and other supporting documents are to be included

 

2.2 The Details of the Statement

The Statement should include;

The estimated contract value of the Works executed and the Contractor’s Documents produced till the end of the month.

Variations should be included.

The below-mentioned items should be excluded;

Any amounts to be added and deducted for;

➤   Changes in legislation in accordance with Sub-Clause 13.7 [Adjustments for Changes in Legislation]

➤   Changes in cost in accordance with Sub-Clause 13.8 [Adjustments for Changes in Cost]

➤   The advance payment and repayments in accordance with Sub-Clause 14.2 [Advance Payment]

➤   Which may have become due under the Contract or otherwise, including those under Clause 20 [Claims, Disputes and Arbitration]

 

The deduction of amounts;

➤   Included in previous Statements

➤   For retention

 

2.3 In the event of the Employer’s Disagreement

Within 28 days after receiving the Statement and the supporting documents, the Employer is to give Notice of any items with which he disagrees.

 

2.4 Timing of the Internal Payments

Except as otherwise stated in Sub-Clause 2.5 [Employer’s Claims], the Employer is to pay the amount that is due in accordance with each statement;

➤   Within 56 days after receiving the Statement and supporting documents

 

Step #3   Payments after the Issuance of the Taking-Over Certificate

1.   The Contractor is to pay the whole of the balance outstanding, if the Advance Payment has not been repaid prior to the issuance of the Taking-Over Certificate.

2.   After the issuance of the Taking-Over Certificate and Works have passed the specific tests, the first half of the Retention Money is to be paid to the Contractor.

 

Step #4   Statement at Completion

4.1 The Details of the Statement

Within 84 days after receiving the Taking-Over Certificate for the Works, the Contractor shall submit to the Employer six copies of a Statement at completion with supporting documents, in accordance with Sub-Clause 14.3 [Application for Interim Payments], showing [1];

(a)   The value of all work done in accordance with the Contract up to the date stated in the Taking-Over Certificate for the Works

(b)   Any further sums which the Contractor considers to be due

(c)   An estimate of any other amounts which the Contractor considers will become due to him under the Contract

 

4.2 In the event of the Employer’s Disagreement

Within 84 days after The Employer is to give Notice of any items with which he disagrees within 28 days after receiving the Statement and supporting documents.

 

4.3 Timing of the Payment regarding the State at Completion

Except as otherwise stated in Sub-Clause 2.5 [Employer’s Claims], the Employer is to pay the amount that is due in accordance with “Statement at Completion”.

➤   Within 56 days of receiving the Statement and supporting documents.

 

Step #5  Payments after the Expiry of the Defects Notification Period [2]

1.   Promptly after the latest of the expiry dates of the Defects Notification Periods, the outstanding balance of the Retention Money shall be paid to the Contractor

2.   However, if any work remains to be executed under Clause 11 [Defects Liability] or Clause 12 [Tests after Completion], the Employer shall be entitled to withhold the estimated cost of this work until it has been executed.

 

Step #6   Issuance of the Performance Certificate

The Performance Certificate is to be deemed to constitute the acceptance of the Works. The Employer is to issue the Performance Certificate within 28 days after the latest of the [3];

➤   Expiry dates of the Defects Notification Period

➤   As soon thereafter as the Contractor has;

• • Supplied all the Contractor’s Documents
  • Completed and tested all the Works
  • Remedied any defects

 

Step #7   Final Payment

7.1 Submission of the Draft Final Statement

Within 56 days after receiving the Performance Certificate, the Contractor shall submit, to the Employer, six copies of a draft final statement including;

➤   The value of all Work done

➤   Any further sums which the Contractor considers to be due to him

 

7.2 In the event of the Employer’s Disagreement

In the event of the Employer’s disagreement the Contractor is to submit further information and make changes.

After these, the Contractor is to submit the Final Statement as agreed.

 

7.3 Timing of the Final Payment

Except as otherwise stated in Sub-Clause 2.5 [Employer’s Claims], the Employer is to pay the final amount due in accordance with Sub-Clause 14.11 [Application for Final Payment] and Sub-Clause 14.12 [Discharge].

➤   Within 42 days after receiving the Final Statement and written discharge.

 

FOOTNOTES

1. The same letters are used as in Sub-Clause 14.10 [Statement at Completion] of the 1999 FIDIC Silver Book.

2. The same letters are used as in Sub-Clause 14.9 [Payment of Retention Money] of the 1999 FIDIC Silver Book.

3. The same letters are used as in Sub-Clause 11.9 [Performance Security] of the 1999 FIDIC Silver Book.

 

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

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